Australia's central bank is pondering whether to take its foot off the policy brakes at a time when most of their rich-world peers are desperately trying to find an accelerator for their sputtering economies.

Seeking to head off inflationary pressures, the Reserve Bank of Australia (RBA) has kept rates at 4.75% for almost a year, a level it terms "tighter than normal".

But a darker economic outlook abroad and downward revisions to core inflation at home have led the RBA to flag the prospect of a cut in rates. In this case, it is not so much a question of whether the economy requires stimulus but whether it still needs to be restrained.

"They must be wondering whether policy needs to be on the tight side of neutral given everything that's happening globally," said Brian Redican, a senior economist at Macquarie.

A slower world is a potential pot hole for a small open economy like Australia that relies heavily on exports of commodities such as coal and iron ore.

The threat has already been enough to trigger an outbreak of easings in emerging nations.

Indonesia surprised everyone this week by cutting rates, following moves by Brazil and Israel. The latter drew attention because Israel was the first central bank to tighten after the global financial crisis, narrowly ahead of the RBA.

Bank of Israel Governor Stanley Fischer cited the threat of slower global growth for his surprise cut. That concern was echoed by the RBA last week when it noted forecasts for global growth had been cut back to no better than average.

"There's also an argument that the 'neutral' rate is lower now than in the past given debt is so high, nobody's borrowing and credit growth is the slowest in 35 years," said Redican.

David Fuller's view Global GDP growth has slowed this year and may still be weakening. We all know this because we read and hear about it in the financial media every day. The declining trend has also been reflected by stock market indices around the world.

The lesser known and potentially more important news is that, sequentially, Brazil, Israel and Indonesia have taken their first step in easing monetary policy for this economic cycle. Australia may now be signalling that it is about to follow this lead.

These four countries have enjoyed GDP growth rates above the global average in recent years. They and many other countries with growth economies began raising interest rates in 2010 to curb inflationary pressures.

Changes in monetary policy are never without implications for investors. Veteran subscribers may recall one of our favourite adages:

Bull markets do not die of old age; they are assassinated by central bankers.

When central bankers reverse their monetary policy bias from tightening to easing, we know that they are more concerned about declining growth rates than inflationary pressures, even though the latter may still be rising.

In common with investors, central bankers are herd animals. However, the people who control monetary policy are hugely influential because it is they who remove or refill the proverbial punchbowl of liquidity.

Not all central banks have raised interest rates over the last year or more. In the USA and the UK, growth is so weak that the Fed and BoE decided to err on the side of inflation. We can be reasonably certain that the ECB wishes it had not raised rates, albeit only once, earlier this year.

Weak GDP growth will remain a justifiable concern for stock markets. Nevertheless, the prolonging of historically low interest rates in weak economies and a move away from the tightening bias in stronger economies is positive news for equities, not least as interest rates remain below inflation levels in most countries.

The monetary policy stance of China and India will remain key catalysts for stock markets, in my opinion. China has the lower inflation rate and commenced its tightening earlier, so it will probably be the first of these two countries to ease. When both China and India are stimulating growth rather than fighting inflation, it should not be long before we see confirmation that Asia's growth engine is lifting the global economy once again.

By that time, I assume price chart action will confirm that most stock markets and commodities are back in cyclical bull trends. Remember, in their secular bull trend commodities are an opportunity when global growth is recovering from a slowdown, but certain to become a problem once again as commodity price inflation resumes.

Meanwhile, stock markets show short-term overbought conditions following strong rallies earlier this month, so it would not be surprising to see some consolidation of those gains. However, the strength of those rallies and increasing evidence that growth economies are ending their monetary tightening bias increases the possibility that the August to early-October lows will hold.

Today's firmness on Wall Street (S&P 500 daily & weekly) suggests that demand is no longer fuelled primarily by short covering. The DJ World Stock Index rebounded strongly from its 2010 lows over the last two weeks. A close below 200, which looks unlikely in my opinion, would be required to negate current scope for sideways to higher ranging in mean reversion towards the 200-day moving average.